Refinance Calculator
Calculate your potential savings from refinancing your mortgage. Compare monthly payments, total interest, and find your break-even point.
When Does Refinancing Make Sense?
Mortgage refinancing replaces your existing home loan with a new one, ideally at better terms. The most common reason to refinance is to secure a lower interest rate, which reduces your monthly payment and the total interest paid over the life of the loan. However, refinancing involves closing costs, so you need to stay in the home long enough to recoup those expenses before you truly benefit.
Understanding the Break-Even Point
The break-even point is the most important number in any refinance decision. It tells you how many months of lower payments it takes to recover the upfront closing costs. Divide your total closing costs by your monthly savings to find this number. If you plan to sell or move before reaching break-even, the refinance will cost you more than it saves. Most financial advisors suggest refinancing only if your break-even point is under 3–4 years.
Rate-and-Term vs. Cash-Out Refinancing
A rate-and-term refinance — modeled by this calculator — simply changes your interest rate, loan term, or both, without increasing your loan balance. A cash-out refinance, on the other hand, lets you borrow more than you owe and pocket the difference. Cash-out refinances carry higher rates and increase your debt, so they should be used cautiously, typically for home improvements or consolidating higher-interest debt.
Choosing the Right Term
Shortening your loan term (e.g., from 30 years to 15 years) can dramatically reduce total interest, but it raises your monthly payment. A longer term lowers payments but costs more in interest over time. Consider your financial goals: if you can comfortably handle higher payments and want to be mortgage-free sooner, a shorter term is powerful. If cash flow is tight, a longer term at a lower rate still saves money compared to your current loan while keeping payments manageable.
Tips for a Successful Refinance
Shop at least three lenders to compare rates and fees — even small differences compound over decades. Check your credit score beforehand, as a higher score unlocks better rates. Ask about lender credits that can offset closing costs in exchange for a slightly higher rate. Finally, avoid resetting a 30-year clock if you are already well into your current loan; a shorter new term preserves the progress you have made toward paying off your home.
Frequently Asked Questions
When does it make sense to refinance my mortgage?
Refinancing typically makes sense when you can lower your interest rate by at least 0.5–1%, plan to stay in the home long enough to recoup closing costs (past the break-even point), or want to switch from an adjustable-rate to a fixed-rate mortgage. You should also consider refinancing if your credit score has improved significantly since your original loan, or if home values have risen enough to eliminate PMI.
What are typical closing costs for a refinance?
Refinance closing costs generally range from 2–5% of the new loan amount. Common fees include appraisal ($300–$700), title search and insurance ($700–$900), origination fees (0.5–1% of the loan), and recording fees. Some lenders offer 'no-closing-cost' refinances, but they typically compensate by charging a higher interest rate, which may cost more over the life of the loan.
What is the break-even point on a refinance?
The break-even point is the number of months it takes for your monthly savings to offset the closing costs of the refinance. For example, if closing costs are $4,000 and you save $200 per month, your break-even point is 20 months. If you plan to sell or move before reaching break-even, refinancing may not be worth it financially.
Should I refinance to a shorter loan term?
Refinancing from a 30-year to a 15-year mortgage can save you tens of thousands in interest, but your monthly payment will likely increase. This makes sense if you can comfortably afford the higher payment and want to build equity faster. If the higher payment would strain your budget, you could refinance to a new 30-year loan at a lower rate and optionally make extra payments when you can.